China has launched the Beijing Stock Exchange Market, the first of its kind in the nation’s capital.
The exchange, which would help small and medium-sized businesses raise financing, was first proposed by China’s Communist Party head, Xi Jinping in September 2021.
On Monday, the first round of 81 companies began trading, including 10 initial public offerings from tech and manufacturing sectors. Shares in those IPOs soared in the start, breaking circuit breakers, before closing with a 200 percent average price increase.
Tongxin Transmission, a manufacturer of automotive components, was the best performer, rising 494 percent. The other 71 Beijing-listed businesses formerly traded on an over-the-counter system for companies not registered on China’s two most important stock exchanges, Shanghai and Shenzhen.
This is the first time an exchange has been established in Beijing, giving the nation’s capital and political center additional clout in the economic and financial worlds.
It comes at a time when Xi is pushing down on some of the country’s greatest tech behemoths, which had been expanding at an almost uncontrolled rate until lately. The campaign of the communist leader strives to ensure that wealth and capital do not get concentrated in the hands of a few industry behemoths.
The BSE’s opening may bring some respite to enterprises in the tech industry, which are facing huge regulatory barriers in raising funds from both the US and China. The Chinese Securities Regulatory Commission announced in September that the Beijing Stock Exchange will “supplement” the Shanghai and Shenzhen stock exchanges by focusing on serving creative smaller businesses. Currently, the BSE’s listed companies have a market value of roughly 3.9 billion yuan ($610 million).
Expanding Beijing’s Sphere of Influence
It is important to point out that the country’s principal stock exchanges are located in the north, distant from the country’s political capital. The Shanghai Stock Exchange, which opened in 1990 and is dominated by large-cap companies such as state-owned enterprises, banks, and energy companies, is based in the eastern metropolis of Shanghai. In southern China, the Shenzhen Stock Exchange has a higher share of technology companies.
The establishment of the Beijing-based exchange also comes at a time when Chinese IT IPOs are becoming more difficult to come by due to increased scrutiny in both China and the United States.
Beijing has been urging its enterprises to float on the domestic stock exchange in order to become less reliant on foreign capital and technology.